The country’s seventh-largest brokerage by market value
declined by the 10 percent daily limit to 9.06 yuan at today’s
opening in Shanghai, after trade was suspended on Aug. 30, and
stayed at that level through the 11:30 a.m. break. The Shanghai
Composite Index (SHCOMP) fell 0.1 percent. The stock has slid 36 percent
this year.

The 23.4 billion yuan ($3.8 billion) of erroneous stock
purchase orders that roiled China’s markets on Aug. 16, and
later trades to offset the mistake, led to Everbright being
barred from most proprietary trading, lifetime bans from the
securities market for four executives and the resignation of the
president. The regulator also imposed 523 million yuan in fines
and confiscation of illegal gains at the end of last week.

“Everbright still faces the risk of a rating downgrade and
investor lawsuits,” Zhao Xianghuai, a Shanghai-based analyst at
Guotai Junan Securities Co. wrote in a research note published
today. “Investors may be seeking as much as 2.7 billion yuan in
compensation. Its other operations, such as asset management and
investment banking, may be suspended.”

Benchmark Penalties

The fine marks a “vivid footnote” to the regulator’s
pledge to crack down on misconduct, the China Securities Journal
wrote in an editorial today. Strict enforcement should be the
norm of the nation’s capital market and the penalties on
Everbright have set the benchmark, the state-controlled
newspaper wrote.

President Xu Haoming, one of the four to receive a lifetime
ban, resigned Aug. 22 and the brokerage suspended Yang Jianbo,
the head of its proprietary trading business. The firm estimated
it lost 194 million yuan on the trades, based on Aug. 16 closing
prices, and said the figure may change.

Everbright’s proprietary trading business, excluding fixed
income, has been halted and the CSRC will also suspend reviews
of any new businesses, the regulator said.

The watchdog’s investigation into the erroneous trades was
its second probe of Everbright this year. The CSRC in June began
scrutinizing the brokerage in relation to Henan Tianfon Energy-Saving Panel Science & Technology Co.’s initial share sale
application, which the regulator said contained falsified
information. The CSRC said July 19 it had concluded field
investigation work and passed the case to its administrative
penalties commission.

Everbright Securities is controlled by state-owned China
Everbright Group, which has businesses from banking, insurance
and asset management to tourism and property development.